A couple saving money to buy a single-family home in Kentucky could deduct up to $50,000 set aside for that purpose over five years from their state income taxes, if a bill pending in the state legislature is approved.
The legislation specifically targets down payment and closing costs because it can be challenging for prospective homebuyers to gather those funds. Individuals and couples who are first-time buyers or haven’t owned a home in at least 10 years would be eligible for the tax deduction. The maximum proposed deduction per year is $5,000 per person or $10,000 for a couple.
“Rising costs of housing are impacting younger generations and their ability to become homeowners,” Barb Curtis, president of Kentucky Realtors, said in a statement. Her group is championing the bill, sponsored by state Rep. Susan Witten.
Kentucky House Bill 195 is modeled on a similar program that Alabama legislators approved in 2019. Since then, 935 homebuyers have claimed tax deductions worth about $2 million, according to a spokesperson for the Alabama Department of Revenue.
To take part in the Kentucky program, a resident would set up a savings account at a bank that has a physical location in the state. The home purchased with the aid of funds from the account has to be the buyer’s principal residence and must be a single-family house or townhome.
The median sales price for a single-family home in the Louisville area was $265,000 at the end of February, according to Homes.com. That’s an increase of 6% from one year ago. In Lexington, the state’s second-largest city, the median price was $350,000, up 5%. The median household income in both cities was close to $60,000.
Witten’s bill has bipartisan support, including 21 co-sponsors, according to Curtis. The legislation is currently pending before the House Appropriations and Revenue Committee.
